Expert advice in one of largest telecoms mergers

In one of the largest telecommunications transactions in recent years, Genesis was retained to provide expert testimony and reports on behalf of Africa's largest mobile operator, MTN (South Africa).

This related to MTN’s successful acquisition of the African operations of Verizon, one of the largest global communications companies, despite the fact that the merger had been vigorously opposed by a competitor.

At the time, Verizon South Africa operated primarily as an Internet Service Provider (ISP) providing internet access and managed network services (MNS) such as virtual private networks (VPNs) and other value-added services to predominantly corporate customers. MTN was primarily a mobile network operator (MNO) providing mobile voice and data services. MTN now also provides MNS and internet access services.

The competitive assessment involved leveraging off the project team’s expertise in the telecommunications sector in order to define and assess the competitive effects in six markets in the network services segment and three markets in the telecommunications infrastructure segment.

This included an analysis of the horizontal overlaps and relevant market dynamics such as scale, network and reputation effects. The vertical analysis involved a consideration of input foreclosure, a common concern of regulators, which involves restriction of access to an upstream input used by downstream competitors.

After the commission recommended that the merger be approved without conditions, Altech objected to the transaction on the basis that, once the merger had been concluded, the entity would have the ability and incentive to inhibit international VOIP/LCR traffic through control of this international Internet gateway.

In this regard, Genesis was able to show that an incentive to engage in the type of foreclosure strategies hypothesised by Altech was highly unlikely to exist.

The Competition Tribunal also ultimately approved the merger without conditions.